Adjustment valve
Once an enormously profitable world leader, Taiwan's garment industry ignored endemic problems, failed to upgrade its technology and design capabilities, and failed to build its own brands. It also had a strong penchant for plagiarism. When the business environment changed, local companies fell like dominos.
As Taiwanese began traveling abroad and became more aware of the larger world in the 1980s, manufacturers from Korea and Hong Kong took advantage of the opportunity to begin exporting their own low-cost fashion-conscious clothing and accessories to Taiwan. Major designer labels also began marketing elegant and expensive designer clothing to Taiwanese women. Meanwhile, a combination of factors that included the migration of mid- and upstream materials suppliers to mainland China, rising labor costs, and a dearth of fresh blood in the design sector, resulted in Taiwanese garment makers exiting the market.
Yu says that a decade ago the goods sold in Taiwanese stores differed greatly from those sold in night markets in terms of the quality of the work, the design, and the quality of the fabric. These days, both stores and night markets deal in mainland Chinese and Korean products. The only difference is whether the clothes have a brand label. But even brand-name clothing falls sharply in price once its season has passed. Seasonal clothing that isn't well received by consumers, has gone out of fashion, or has blemishes typically makes its way back into the market via night markets. If Taiwan's night markets didn't exist, tens of thousands of small Taiwanese manufacturers and wholesalers would face immediate extinction. Our night markets' unique role in the economy is especially obvious during economic downturns.
Taxes, rents, and rights
Many people believe that night-market vending is a low-cost, high-profit en-deavor that doesn't involve taxes or rent. Are they right?
Ministry of Finance regulations state that if a street vendor operates a business at a fixed location, the vendor must pay a 1% business tax. The amount of the tax depends on factors including the type of business, the square footage of the operation, and the location, which are used to create a revenue assessment. The highest- revenue tier is set at NT$266,700 per month, yielding a tax of NT$2,667 per month. But in recent months a number of snack stalls have caught the eye of mainland tourists and seen their businesses explode in popularity, leading to questioning of the National Tax Administration's assessments. For example, it has been pointed out that the Zheng Papaya Milkshake shop in Kao-hsiung's -Liuhe Night Market has as many as 12 employees working at a time and sells an average of 700 milkshakes a day (at NT$50 each). Such snack stalls are far exceeding their assessment levels. Is the NTA checking up on them?
The Taipei office of the NTA says that it has to verify these kinds of claims. To do so, it usually sends an investigator to look in on the business at different times of day. When it finds a snack stand that really is generating business beyond its assessment level, it levies a supplemental tax on the excess. The Taipei office has, for example, made upwards revisions to the assessment on a certain fried chicken cutlet stand in Shi-lin Night Market. But the NTA notes that a number of factors affect the amount of business at these kinds of small stands, including weather, the economy, and the presence of new competitors nearby. Given that their sales fluctuate widely, the NTA says it tends to be "conservative" in its assessments.
The notion that street vendors don't pay rent is also inaccurate. Yu explains that every night market has its own rents. For example, spots on the arcade in front of shops on Shi-lin's Da-dong East Road and Wen-lin Road go for NT$15-40,000 per month and are hard to come by even at those kinds of prices.
Entrepreneurs seeking one of the limited number of spaces in a well known night market need good connections, as well as the ability to afford high rents.
A vendor in Tai-chung's Feng-jia Night Market provides a case in point. This vendor started out by renting a 180-square-foot storefront for NT$60,000 per month nine years ago, but has since got to know the people in the market much better. A year ago, he was able to persuade a street vendor in the market to move over enough for him to squeeze in a food truck, a privilege for which he pays NT$30,000 per month-but the truck does better business than the shop. Now he and his wife each handle one of their two spots, one in the shop, the other on the street.
A street-vending entrepreneur
Market permits are another limiting factor. Though the government permits vendors to pass their licenses on to their immediate family, they are not permitted to transfer them to others. Of course, as everyone who makes their living in night markets knows, it doesn't work that way in practice.
The rights to a licensed snack stall in Shi-lin Night Market can command as much as NT$6 million. Those to a stall in Kee-lung's Miao-kou Night Market go for about NT$3 million.
While the "illegality" of the private transfers of stalls means that the name on the license remains the same, many people are quite willing to lay out large sums of money to operate under a false name and hope that nothing goes wrong.
But in recent years members of the public have begun filing complaints about the illegal transfer of snack stalls. As a result, some 30 stalls in a well known night market in the south lost their licenses. Clearly, many people covet night-market spaces and want one for themselves.
Doing business in a night market is no different from doing it anywhere else: some people make a mint; others lose their shirts. A popular night-market tale has snack-stall operators moving on to become mainstream entrepreneurs. Wan-hua's Tai-nan Dan-zai Noodles and the island-wide Formosa Chang restaurant chain are well known examples of the tale playing out in the real world.
The book Vendor Entrepreneur describes how Formosa Chang grew from a stall in Tai-pei's Ning-xia Night Market into a national chain. Chang Yung-chang, the company's current chairman, began helping his father mind their snack stall at the age of six, serving food and clearing up tables after school. Hearing neighbors yell at his father for waking them up as he tiptoed home with his cart in the wee hours of the morning, he resolved to improve his family's financial circumstances.
For more than a decade, he watched his parents live their lives on a vampire's scheduling, getting up at 12:30 in the afternoon to prep food, setting up their stall at 5 p.m., and working in it until two the next morning. After completing his military service, Chang suggested to his father that spending 12 hours a day to do eight hours of business wasn't efficient, and told his father that he was going into a different line of work unless the elder Chang moved their business into a proper storefront.
Though his father chided him for being a "beggar with ambitions," he reluctantly agreed. Fortunately, they were able to acquire the shop behind their stall for NT$40,000 per month in 1979 when the building supply store that had occupied it relocated. Once in the storefront, they began serving lunches that drew in business from residents and office workers in the neighborhood. When sales continued to improve, they began serving food round the clock.
Training ground
In his efforts to transform stewed minced pork over rice into a signature Taiwanese snack, Chang studied the operations of fast-food leader McDonald's closely. He came away deeply impressed by the industry giant's ability to run eateries that didn't have a greasy feel. In 1983, he became one of the first Taiwanese snack-shop owners to install air-conditioning and receive ISO certification, ensuring that his customers would be confident of the safety of his food and comfortable while eating it. He began offering franchises in 1993 and now has 39 restaurants throughout Taiwan that together generate NT$600 million in annual revenues.
Night markets have long been regarded as part of the informal economy, both for their small size and their slightly shady reputation. But today's night markets offer a great deal to the formal economy: they represent a safety net for those who have lost their jobs; provide distribution to innumerable small businesses; and function as a training ground for Taiwan's entrepreneurs. It's time to see our night markets in a positive light!